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Full text of "AMERICA ONLINE, INC. 1992 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN"

AMERICA ONLINE, INC. 

1992 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN 



DEFINITIONS . 

Unless otherwise specified or unless the context otherwise 
requires, the following terms, as used in this America 
Online, Inc. 1992 Employee, Director and Consultant Stock 
Option Plan, have the following meanings: 

Administrator means the Board of Directors, unless it 
has delegated power to act on its behalf to a 
committee. (See Article 4) 

Affiliate means a corporation which, for purposes of 
Section 424 of the Code, is a parent or subsidiary of 
the Company, direct or indirect. 

Board of Directors means the Board of Directors of the 
Company . 

Code means the United States Internal Revenue Code of 
1986, as amended. 

Committee means the Committee to which the Board of 
Directors has delegated power to act under or pursuant 
to the provisions of the Plan. 

Common Stock means shares of the Company's common 
stock, $.01 par value. 

Company means America Online, Inc., a Delaware 
corporation . 

Disability or Disabled means permanent and total 
disability as defined in Section 22(e) (3) of the Code. 

Fair Market Value of a Share of Common Stock means: 

(1) If the Common Stock is listed on a national 
securities exchange or traded in the over-the-counter 
market and sales prices are regularly reported for the 
Common Stock, the average of the closing or last prices 
of the Common Stock on the Composite Tape or other 
comparable reporting system for the ten (10) 



consecutive trading days iiranediately preceding such 
applicable date; • 

(2) If the Common Stock is not traded on a national 
securities exchange but is traded on the 
over-the-counter market, if sales prices are not 
regularly reported for the Common Stock for the ten 
(10) days referred to in clause (l) , and if bid and 
asked prices for the Common Stock are regularly _ 
reported, the average of the mean between the bid and 
the asked price for the Common Stock at the close of 
trading in the over-the-counter market for the ten (10) 
days on which Common Stock was traded immediately 
preceding such applicable date; and 

(3) If the Common Stock is neither listed on a 
national securities exchange nor traded in the 
over-the-counter market, such value as the _ 
Administrator, in good faith, shall determine. 

ISO means an option meant to qualify as an incentive 
stock option under Code Section 422. 

K-Pv EmDl6vee means an employee of the Company or of an 
Affiliate (including, without limitation, an employee 
who is alscserving as an officer or director of the 
Company or of an Affiliate), designated by the 
-: AdiniTaistrator: to. be eligible to be granted one or more 
Options- under the Plan. 

Non-Oual i f -1 ed Option means an option which is not 
intended to qualify as an ISO. 

Option means an ISO or Non-Qualified Option granted 
under the Plan. 

On t ion Agreement means an agreement between the Company 
and a Participant executed and delivered pursuant to 
the Plan, 

Participant means a Key Employee, director or 
consultant to whom one or more Options are granted 
under the Plan. As used herein, "Participant" shall 
include "Participant's Survivors" where the context 
requires . 

Participant ' r- Survivors means a deceased Participant 's 
■legal representatives and/or any person or persons who 
acquired the Participant's rights to an Option by will 
or by the laws of descent and distribution. 



2 



Plan means this America Online, Inc. 1992 Employee, 
Director and Consultant Stock Option Plan. 

Shares means shares of the Common Stock as to which 
Options have been or may be granted under the Plan or 
any shares of capital stock into which the Shares are 
changed or for which they are exchanged within the 
provisions of Paragraph 3 of the Plan. The Shares 
issued upon exercise of Options granted under the Plan 
may be authorized and unissued shares or shares held by 
the Company in its treasury, or both. 



2 . PURPOSES OF THE PLAN . 

The Plan is intended to encourage ownership of Shares by Key 
Employees, directors and certain consultants to the Company in 
order to attract such people, to induce them to work for the 
benefit of the Company or of an Affiliate and to provide 
additional incentive for them to promote the success of the 
Company or of an Affiliate. The Plan provides for the issuance 
of ISOs and Non-Qualified Options. 



3 . SHARES SUBJECT TO THE PLAN . 

The number:, of -.Shares, subject to this Plan as to which 
Options may^,be -granted, from, time to time shall be 130,000 
(increased , to 260, 000 effective upon the stock split approved by 
the Company's Board of Directors on the date hereof), or the 
equivalent of such number of Shares after the Administrator, in 
its sole discretion, has interpreted the effect of any stock 
split, stock dividend, combination, recapitalization or similar 
transaction effected after such date in accordance with Paragraph 
16 of the Plan. 

If an Option ceases to be "outstanding", in whole or in 
part, the Shares which were subject to such Option shall be 
available for the granting of other Options under the Plan. _ Any 
Option shall be treated as "outstanding" until such Option is 
exercised in full, or terminates or expires under the provisions 
of the Plan, or by agreement of the parties to the pertinent 
Option Agreement;. 



4 . ADMINISTRATION.: OF THE "PLAN . 

The Administrator of - the Plan will be the Board of 
Directors, except to the extent the Board of Directors delegates 
its authority to a Committee of the Board of Directors. 
Following the date on which the Common Stock is registered under 
the Securities and Exchange Act of 1934, as amended (the "1934 



3 



Act"), the Plan is intended to comply in all respects _ with Rule 
16b- 3 or its successors, promulgated. pursuant to Section 16 of 
the 1934 Act with respect to Participants who are subject to_ 
Section 16 of the 1934 Act, and any provision in this Plan with 
respect to such persons contrary to Rule 16b- 3 shall be deemed 
null and void to the extent permissible by law and deemed 
appropriate by the Administrator. Subject to the provisions of 
the Plan, the Administrator is authorized to: 

a. Interpret the provisions of the Plan or of any Option 
or Option Agreement and to make all rules and 

. determinations which it deems necessary or advisable 
for the administration of the Plan; 

b. Determine which employees of the Company or of an 
Affiliate shall be designated as Key Employees and 
which of the Key Employees, directors and consultants 
shall be granted Options; 

c. Determine the number of Shares for which an Option or 
Options shall be granted; and 

d. Specify the terms and conditions upon which an Option 
or Options may be granted; 

provided,, however, that all such interpretations, rules, 
determinations, -..terms -and conditions shall be made and 
prescribed-.in:,the . context of preserving the tax status under 
Code Section 422 of those Options which are designated as 
ISOs. Subject to the foregoing, the interpretation and 
construction by the Administrator of any provisions of the 
Plan or of any Option granted under it shall be final, 
unless otherwise determined by the Board of Directors, if 
the Administrator is other than the Board of Directors. 



5. ELIGIBILITY FOR PARTICIPATION . 

The: Administrator will, in its sole discretion, name the 
Participants in the Plan, provided, however, that each 
Participant must be a Key Employee, director or consultant of the 
Company or of an Affiliate at the time an Option is granted. 
Notwithstanding ;any of the foregoing provisions, the 
Administrator may authorize the grant of an Option to a person 
not then an. employee, director or consultant of the Company or of 
an Affiliate. . The actual.,. grant of such Option, however, shall be 
N conditioned; upon, -such .person becoming eligible to become a 
Participant at or prior to the time of the execution of the 
Option Agreement evidencing such Option. ISOs may be granted 
only to Key Employees. Non-Qualified Options may be granted to 
any Key Employee, director or consultant of the Company or an 
Affiliate. The granting of any Option to any individual shall 



4 



neither entitle that individual to, nor disqualify him or her 
from, participation in any other grant' of Options. 



6, TERMS AND CONDITIONS OF OPTIONS . 

Each option shall be set forth in writing in an Option 
Agreement, duly executed by the Company and by the Participant. 
Th6A Administrator may provide that Options be granted subject to 
such conditions as the Administrator may deem appropriate 
including, without limitation, subsequent approval by the 
stockholders of the Company of this Plan or any amendments 
thereto. The Option Agreements shall be subject to at least the 
following terms and conditions: 

A. Non-Oualif ied Options : Each Option intended to be a 

Non-Qualified Option shall be subject to the terms and 
conditions which the Administrator determines to be 
appropriate and in the best interest of the Company, 
subject to the following minimum standards for any such 
Non-Qualified Option: 

a. Option Price: The option price (per share) of _ the 
Shares covered by each Option shall be determined 
by the Administrator but shall not be less than 
the par value per share of Common Stock. 

b. Each Option Agreement shall state the number of 
Shares to which it pertains; 

c. Each Option Agreement shall state the date or 
dates on which it first is exercisable and the 
date after which it may no longer be exercised, 
and may provide that the Option rights accrue _ or 
become exercisable in installments over a period 
of months or years, or upon the attainment of 
stated goals; and 

d. Exercise of any Option may be conditioned upon the 
Participant's execution of a Share purchase 
agreement in form satisfactory to the 
Administrator providing for certain protections 
for the Company and its other shareholders 
including requirements that: 

i. The Participant's or the Participant's 
Survivors' right to sell the Shares may be 
restricted; and 

ii. The Participant or the Participant's 
Survivors may be required to execute letters 
of investment intent and must also 



5 



acknowledge that the Shares will bear legends 
noting any applicable restrictions. 

B. iSOs : Each Option intended to be an ISO shall be 
issued only to a Key Employee and be subject to at 
least the following terms and conditions, with such 
additional restrictions or changes as the Administrator 
determines are appropriate but not in conflict with 
Code Section 422 and relevant regulations and rulings 
of the Internal Revenue Service: 

a. Minimum standards: The ISO shall meet the minimum 
standards required of Participants who are granted 
Non- Qualified Options, as described above, except 
clause (a) thereunder. 

b. Option Price: Immediately before the Option is 
granted, if the Participant owns, directly or by 
reason of the applicable attribution rules in Code 
Section 424 (d) : 

i. Ten percent (10%) or less of the total 
combined voting power of all classes of share 
capital of the Company or an Affiliate, the 
Option price (per share) of the Shares 
covered by each Option shall not be less than 
one hundred percent (100%) of the Fair Market 
Value (per share) of the Shares on the date 
of the grant of the Option. 

ii. More than ten percent (10%) of the total 
combined voting power of all classes of share 
capital of the Company or an Affiliate, the 
Option price (per share) of the Shares 
covered by each Option shall not be less than 
one hundred ten percent (110%) of the said 
Fair Market Value on the date of grant. 

c. Term of Option: For Participants who own 

i. Ten percent (10%) or less of the total 
combined voting power of all classes of share 
capital of the Company or an Affiliate, each 
Option shall terminate not more than ten (10) 
years from the date of the grant or at such 
earlier time as the Option Agreement may 
provide . 

ii. More than 10% of the total combined voting 
power of all classes of share capital of the 
Company or an Affiliate, each Option shall 
terminate not more than five (5) years from 



6 



the. date of the grant or at such earlier time 
as the Option Agreement may provide. 

d. Medium of Payment: The Option price shall be 
payable upon the exercise of the Option and only 
in such form as the Administrator determines and 
as is permitted by Section 422 of the Code. 

e. Limitation on Yearly Exercise: The Option 
Agreements shall restrict the amount of Options 
which may be exercisable in any calendar year 
(under this or any other ISO plan of the Company 
or an Affiliate) so that the aggregate Fair Market 
Value (determined at the time each ISO is granted) 
of the stock with respect to which ISOs are 
exercisable for the first time by the Participant 
in any calendar year does not exceed one hundred 
thousand dollars ($100,000), provided that this 
subparagraph (e) shall have no force or effect if 
its inclusion in the Plan is not necessary for 
Options issued as ISOs to qualify as ISOs pursuant 
to Section 422(d) of the Code. 

f . Limitation on Grant of ISOs: No ISOs shall be 
granted after February 3, 2002, the date which is 
the earlier of ten (10) years from the date of the 
adoption, of- the Plan by the Company and the date 
of the- approval of the Plan by the shareholders of 
the Company. 

C. Directors' Options : On November 1 of each year, each 
director who is not an employee of the Company or any 
Affiliate shall be granted a Non-Qualified Option to 
purchase 1,000 Shares (increased to 2,000 Shares 
effective upon the stock split approved by the 
Company's Board of Directors on the date hereof). Each 
such Option shall (i) have an exercise price equal to 
the Fair Market Value (per share) of the Shares on the 
date of grant of the Option, (ii) have a term of ten 
(10) years, and (iii) be exercisable upon completion of 
one full year of service on the Board of Directors 
after the date of grant. Notwithstanding the 
provisions of Paragraph 23 concerning amendment of the 
Plan, 'the provisions of this Subparagraph C shall not 
be amended. more, than once every six months, other than 
to comport- with, changes in the Code, the Employee 
Retirement-Income Security Act, or the rules 
thereunder. . 



7 



RXRRCISE OF OPTION AND ISSTTF/ OF SHARES. 



An Option (or any part or installment thereof) shall be 
exercised by giving written notice to the Company at its 
principal office address, together with the tender of the full 
purchase price for the Shares as to which such Option- is being 
exercised, and upon compliance with, any other condition (s) set 
forth in the Option Agreement. Such written notice shall be 
siqned by the person exercising the Option, shall state the 
number of Shares with respect to which the Option is being 
exercised and shall contain any representation required by the _ 
Plan or the Option Agreement. Full payment of the purchase price 
for the Shares as to which such Option is being exercised shall 
be made (a) in United States dollars in cash or by check, or (b) 
at the discretion of the Administrator, through delivery of 
shares of Common Stock having a fair market value equal as of the 
date of the exercise to the cash exercise price of the Option, 
determined in good faith by the Administrator, or (c) at the 
discretion of the Administrator, by delivery of the grantee's 
personal recourse note bearing interest payable not less than 
annually at no less than 100% of the applicable Federal rate, as 
defined in Section 1274(d) of the Code, or (d) at the discretion 
of the Administrator, by any combination of (a) , _ (b) and (c) 
above. Notwithstanding the foregoing, the Administrator shall 
accept only such payment on exercise of an ISO as is permitted by 
Section 422 of the Code. 

The' Company, shall . then reasonably promptly deliver the 
Shares as to which such Option was exercised to the Participant 
(or to the Participant's Survivors, as the case may be). In 
determining what constitutes "reasonably promptly," it is 
expressly understood that the delivery of the Shares may be 
delayed by the Company in order to comply with any law or _ 
regulation which requires the Company to take any action with 
respect to the Shares prior to their issuance. The Shares shall, 
upon delivery, be evidenced by an appropriate certificate or 
certificates for fully paid, non-assessable Shares. 

The Administrator shall have the right to accelerate the 
date of exercise of any installment of any Option; provided that 
the Administrator shall not accelerate the exercise date of any 
installment of any Option granted to any Key Employee as an ISO 
(and not previously converted into a Non-Qualified Option 
pursuant to paragraph 19) if such acceleration would violate the 
annual vesting limitation.. contained in Section 422(d) of the 
Code, as: described.' in paragraph 6.B. (e) . 



8. RIGHTS AS A SHAREHOLDER . 

No Participant to whom an Option has been granted shall have 
rights as a shareholder with respect to any Shares covered by 

- 8 - 



such Option, except after due exercise of the Option and tender 
of the full purchase price for the Shares being purchased 
pursuant to such exercise and registration of the Shares m the 
Company's share register in the name of the Participant. 

9. ASSIGNABIT.TTY AND TRANSFERAB ILITY OF OPTIONS. 

By its terms, an Option granted to a Participant shall not 
be transferable by the Participant other than by will or by the 
laws of descent and distribution and shall be exercisable, during 
the Participant's lifetime, only by such Participant (or by his 
or her legal representative) . Such Option shall not be assigned, 
pledged or hypothecated in any way (whether by operation of law 
or otherwise) and shall not be subject to execution, attachment 
or similar process. Any attempted transfer, assignment, pledge, 
hypothecation or other disposition of any Option or of any rights 
granted thereunder contrary to the provisions of this Plan, or 
the levy of any attachment or similar process upon an Option, 
shall be null and void. 



10. EFFECT OF TERMINATION OF SERVICE OTHE R THAN "FOR CAUSE". 

Except as otherwise provided in the pertinent Option 
Agreement, in the event of a termination of service (whether as 
an employee, . director or- consultant) with the Company or an 
Affiliate before. the . Participant has exercised all Options, the 
following rules apply: . 

a. A Participant who ceases to be an employee, director or 
consultant of the Company or of an Affiliate (for any 
reason other than termination "for cause". Disability, 
or death for which events there are special rules in 
Paragraphs 11, 12, and 13, respectively), may exercise 
any Option granted to him or her to the extent that the 
right to purchase Shares has accrued on the date of 
such termination of service, but only within such term 
as the Administrator has designated in the pertinent 
Option Agreement. 

b. In no event may an Option Agreement provide, if the 
Option is intended to be an ISO, that the time for 
exercise be later than three (3) months after the 
Participant's termination of employment. 

c. The provisions -of this paragraph, and not the 
provisions of -Paragraph 12 or 13, shall apply to a_ 
Participant who subsequently becomes disabled or dies 
after the termination of employment, director status or 
consultancy, provided, however, in the case of a 
Participant's death within three (3) months after the 



9 



termination of employment, director status or 
consultancy, the Participant's Survivors may exercise 
the Option within one (1)' year after the date of the 
Participant's death, but in no event after the date of 
expiration of the term of the Option. 

d. Notwithstanding anything herein to the contrary, if 
subsequent to a Participant's termination of 
employment, termination of director status or 
termination of consultancy, but prior to the exercise 
of an Option, the Board of Directors determines that, 
either prior or subsequent to the Participant's 
termination, the Participant engaged in conduct which 
would constitute "cause", then such Participant shall 
forthwith cease to have any right to exercise any 
Option. 

e. A Participant to whom an Option has been granted under 
the Plan who is absent from work with the Company or 
with an Affiliate because of temporary disability _ (any 
disability other than a permanent and total Disability 
as defined in Paragraph 1 hereof) , or who is on leave ■ 
of absence for any purpose, shall not, during the 
period of any such absence, be deemed, by virtue of 
such absence alone, to have terminated such 
Participant's employment, director status or 
consultancy with the Company or with an Affiliate, 
except .as. the Administrator may otherwise expressly 
provide. 

f . Options granted under the Plan shall not be affected by 
any change of employment or other service within or 
among the Company and any Affiliates, so long as the 
Participant continues to be an employee, director or 
consultant of the Company or any Affiliate, provided, 
however, if a Participant's employment by either the 
Company or an Affiliate should cease (other than to 
become an employee of an Affiliate or the Company) , 
such termination shall affect the Participant's rights 
under any Option granted to such Participant in 
accordance with the terms of the Plan and the pertinent 
Option Agreement. 



11. EFFECT OF .TERMINATION OF SERVICE "FOR CAUSE" . 

Except. as' Otherwise, provided in the pertinent Option 
Agreement, the following- rules apply if the Participant's service 
(whether as an employee, director or consultant) with the Company 
or an Affiliate is terminated "for cause" prior to the time that 
all of his or her outstanding Options have been exercised: 



10 



a. All outsta,nding and unexercised Options as of the date 
the Participant is notified his or her service is 
terminated "for cause" will iirmediately be forfeited, 
unless the Option Agreement provides otherwise. 

b. For purposes of this Article, "cause" shall • include 
(and is not limited to) dishonesty with respect to the 
employer, insubordination,' substantial malfeasance or 
non-feasance of duty, unauthorized disclosure of 
confidential information, and conduct substantially 
prejudicial to the business of the Company or any 
Affiliate. The determination of the Administrator as 
to the existence of cause will be conclusive on the 
Participant and the Company. 

c. "Cause" is not limited to events which have occurred 
prior to a Participant's termination of service, nor is 
it necessary that the Administrator's finding of 
"cause" occur prior to termination. If the 
Administrator determines, subsequent to a Participant's 
termination of service but prior to the exercise of an 
Option, that either prior or subsequent to the 
Participant's termination the Participant engaged in 
conduct which would constitute ''cause", then the right 
to exercise any Option is forfeited. 

d. Any definition ..in an agreement between the Participant 
and the Company or an Affiliate, which contains a 
conflicting definition of "cause" for termination and 
which is in effect at the time of such termination, 
shall supersede the definition in this Plan with 
respect to such Participant. 



12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY . 

Except, as otherwise provided in the pertinent Option 
Agreement, a Participant who ceases to be an employee, director 
or consultant of the Company or of an Affiliate by reason of 
Disability may exercise any Option granted to such Participant: 

a. To the extent that the right to purchase Shares has 
accrued on the date of his or her Disability; and 

b. In the event . rights to exercise the Option accrue 
periodically, to the extent of a pro rata portion of 
any additional rights as would have accrued had the 
Participant not" become Disabled prior to the end of the 
accrual period which next ends following the date of 
Disability. The proration shall be based upon the 
number of days of such accrual period prior to the date 
of Disability. 



11 



A Disabled Participant may exercise such rights only within 
a period of not more than one (1) year after the date that the 
Participant became Disabled, notwithstanding that the Participant 
might have been able to exercise the Option as to some or all of 
the Shares on a later date if he or she had not become disabled 
and had continued to be an employee, director or consultant or, 
if earlier, within the originally prescribed term of the Option. 

The Administrator shall make the determination both of 
whether Disability has occurred and the date of its occurrence 
(unless a procedure for such determination is set forth in 
another agreement between the Company and such Participant in 
which case such procedure shall be used for such determination) . 
If requested, the Participant shall be examined by a physician 
selected or approved by the Administrator, the cost of which 
examination shall be paid for by the Company. 



13 . EFFECT OF DEATH WHILE AN EMPLOYEE. DIRECTOR OR CONSULTANT . 

Except as otherwise provided in the pertinent Option 
Agreement, in the event of the death of a Participant to whom an 
Option has been granted while the Participant is an employee, 
director or consultant of the Company or of an Affiliate, such 
Option may be exercised by the Participant's Survivors: 

a. To the extent exercisable but not exercised on the date 
of death; and . 

b. In the event rights to exercise the Option accrue 
periodically, to -the extent of a pro rata portion of 
any additional rights which would have accrued had the 
Participant not died prior to the end of the accrual 
period which next ends following the date of death. 
The proration shall be based upon the number of days of 
such accrual period prior to the Participant's death. 

If the Participant's Survivors wish to exercise the Option, 
they must take all necessary steps to exercise the Option within 
one (1) year after the date of death of such Participant, 
notwithstanding that the decedent might have been able to 
exercise the Option as to some or all of the Shares on a later 
date if he or she had not died and had continued to be an 
employee, director or consultant or, if earlier, within the 
originally prescribed term of the Option. 



14 . PURCHASEvFOR INVESTMENT . 

Unless the offering and sale of the Shares to be issued upon 
the particular exercise of an Option shall have been effectively 
registered under the Securities Act of 1933, as now in force or 



12 



hereafter amended (the "1933 Act") , the Company shall be under no 
obligation to issue the Shares covered by such exercise unless 
and until the following conditions have been fulfilled: 

a The person (s) who exercise such Option shall warrant to 
the Company, at the time of such exercise or. receipt, 
as the case may be, that such person (s) are acquiring 
such Shares for their own respective accounts, for 
investment, and not with a view to, or for sale m 
connection with, the distribution of any such Shares, 
in which event the person (s) acquiring such Shares 
shall be bound by the provisions of the following 
legend which shall be endorsed upon the certificate (s) 
evidencing their Shares issued pursuant to such 
exercise or such grant: 

"The shares represented by this certificate have 
been taken for investment and they may not be sold 
or otherwise transferred by any person, including 
a pledgee, unless (1) either (a) a Registration 
Statement with respect to such shares shall be 
effective under the Securities Act of 1933, as 
amended, or (b) the Company shall have received an 
opinion of counsel satisfactory to it that an 
exemption from registration under such Act is then 
available, and (2) there shall have been 
compliance. with all applicable state securities 
laws . 

b The Company shall have received an opinion of its 
counsel that the Shares may be issued upon such 
particular exercise in compliance with the 1933 Act 
without registration thereunder. 

The Company may delay issuance of the Shares until _ 
completion, of any action or obtaining of any consent which the 
Company deems necessary under any applicable law (including, 
without limitation, state securities or "blue sky" laws) . 



15. nTSSOLUTION OR LIQTTIDATION OF THE COMPANY. 

Upon the dissolution or liquidation of the Company, all 
Options granted binder this Plan which as of such date shall not 
have been exercised will terminate and become null and void; 
provided, however, that if the rights of a Participant or a 
Participant's Survivors have not otherwise terminated and 
expired, the. Participant, or the Participant's Survivors will have 
the right immediately prior to such dissolution or liquidation to 
exercise any Option to the extent that the right to purchase 
Shares has accrued under the Plan as of the date immediately 
prior to such dissolution or liquidation. 



13 



16 . ADJUSTMENTS . 



Upon the occurrence of any of the following events, a 
Participant's rights with respect to any Option granted to him or 
her hereunder which have not previously been exercised in full 
shall be adjusted as hereinafter provided, unless otherwise 
specifically provided in the written agreement between the 
Participant and the Company relating to such Option: 

A. Stock Dividends and Stock Splits . If the shares of 
Common Stock shall be subdivided or combined into a greater or 
smaller number of shares or if the Company shall issue any shares 
of Common Stock as a stock dividend on its outstanding Common 
Stock, the number of shares of Common Stock deliverable upon the 
exercise of such Option shall be appropriately increased or 
decreased proportionately, and appropriate adjustments shall be 
made in the purchase price per share to reflect such subdivision, 
combination or stock dividend. 

B. Consolidations or Mergers . If the Company is to be 
consolidated with or acquired by another entity in a merger, sale 
of all or substantially all of the Company's assets or otherwise 
(an "Acquisition")", the Administrator or the board of directors 
of any entity assuming the obligations of the Company hereunder 
(the "Successor Board".)-, ■ shall, as to outstanding Options, either 
(i) make -appropriate ; provision for the continuation of such 
Options . by substituting. .on an equitable basis for the Shares then 
subject to such- Options either the consideration payable with 
respect to the outstanding shares of Common Stock in connection 
with the Acquisition or securities of any successor or acquiring 
entity; or (ii) upon written notice to the Participants, provide 
that all Options must be exercised, to the extent then 
exercisable, within a specified number of days of the date of 
such notice, at the end of which period the Options shall 
terminate;,: or (iii) terminate all Options in exchange for a cash 
payment equal to the excess of the fair market value of the 
shares subject to such Options (to the extent then exercisable) 
over the. exercise price thereof. 

C. Recapitalization or Reorganization . In the event of a 
recapitalization or reorganization of the Company (other than a 
transaction described in subparagraph B above) pursuant to which 
securities of the Company or of another corporation are issued 
with respect to the outstanding shares of Common Stock, a 
Participant upon exercising an Option shall be entitled to 
receive, for the purchase price paid upon such exercise the 
securities he or she would have received if he or she had 
exercised such Option prior to such recapitalization or 
reorganization . 



14 



D, Modification of ISOs . Notwithstanding the foregoing, 
any adjustments made pursuant to subparagraphs A, B or C with 
respect to ISOs shall be made only after the Administrator, after 
consulting with counsel for the Company, determines whether such 
adjustments would constitute a "modification" of such ISOs (as 
that term is defined in Section 424(h) of the Code) or would 
cause any adverse tax consequences for the holders of such ISOs. 
If the Administrator determines that such adjustments made with 
respect to ISOs would constitute a modification of such ISOs, it 
may refrain from making such adjustments, unless the holder of an 
ISO specifically requests in writing that such adjustment be made 
and such writing indicates that the holder has full knowledge of 
the consequences of such "modification" on his or her income tax 
treatment with respect to the ISO. 



17. ISSUANCES OF SECURITIES . 

Except as expressly provided herein, no issuance by the 
Company of shares of stock of any class, or securities 
convertible into shares of stock of any class, shall affect, and 
no adjustment by reason thereof shall be made with respect to, 
the number or price of shares subject to Options. Except as 
expressly provided" herein, no adjustments shall be made for 
dividends paid in cash or in property (including without 
limitation, securities), of the Company. 



18. FRACTIONAL" SHARES . 

No fractional share shall be issued under the Plan and the 
person exercising such right shall receive from the Company cash 
in lieu of such fractional share equal to the fair market value 
thereof determined in good faith by the Board of Directors of the 
Company . 

19 . CONVERSION OF ISOs INTO NON-OUALIFIED OPTIONS: 
TERMINATION OF ISOs . 

The Administrator, at the written request of any 
Participant, may in its discretion take such actions as may be 
necessary to convert such Participant's ISOs (or any portions 
thereof) that have not been exercised on the date of conversion 
into Non-Qualified Options at any time prior to the expiration of 
such ISOs,. regardless of whether the Participant is an employee 
of the Company .or an Affiliate at the time of such conversion. 
Such actions; may: include, but not be limited to, extending the 
exercise period- or reducing the exercise price of the appropriate 
installments of such Options. At the time of such conversion, 
the Administrator (with the consent of the Participant) may 
impose such conditions on the exercise of the resulting 
Non-Qualified Options as the Administrator in its discretion may 



15 



determine, provided that such conditions shall not be 
inconsistent with this Plan. Nothing in the Plan shall be deemed 
to give any Participant the right to have such Participant's 
ISO's converted into Non-Qualified Options, and no such 
conversion shall occur until and unless the Administrator takes 
appropriate action. The Administrator, with the consent of the 
Participant, may also terminate any j)ortion of any ISO that has 
not been exercised at the time of such termination. 



20. WITHHOLDING . 

Upon the exercise of a Non-Qualified Option for less than 
the then Fair Market Value or the making of a Disqualifying 
Disposition (as defined in paragraph 21) , the Company may 
withhold from the Participant's wages, if any, or other _ 
remuneration, or may require the Participant to pay additional 
federal, state, and local income tax withholding and employee 
contributions to employment taxes in respect of the amount that 
is considered compensation includible in such person's gross 
income. The Administrator in its discretion may condition the 
exercise of an Option for less than the then Fair Market Value on 
the Participant's payment of such additional income tax 
withholding and employee contributions to employment taxes. 



21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. 

Each Key Employee who receives an ISO must agree to notify 
the Company in writing immediately after the Key Employee makes a 
Disqualifying Disposition of any shares acquired pursuant to the 
exercise of an ISO. A Disqualifying Disposition is any 
disposition (including any sale) of such shares before the later 
of ■ (a) two years after the date the Key Employee was granted the 
ISO, or (b) one year after the date the Key Employee acquired 
shares by exercising the ISO. If the Key Employee has died 
before such stock is sold, these holding period requirements do 
not apply and no Disqualifying Disposition can occur thereafter. 



22 . TERMINATION OF THE PLAN . 

The Plan will terminate on February 3, 2002, the date which 
is ten (10) year's from the earlier of the date of its adoption 
and the date, of. its approval by the stockholders of the Company. 
The Plan may be terminated at an earlier date by vote of the 
stockholders of ; the' Company; provided, however, that any such _ 
earlier termination will not affect any Options granted or Option 
Agreements executed prior to the effective date of such 
termination. 



16 



23 . AMENDMENT OF THE PLAN . 



The Plan may be amended by the' stockholders of _ the Company. 
The Plan may also be amended by the Administrator, including, 
without limitation, to the extent necessary to qualify any or all 
outstanding Options granted under the Plan or Option's to be 
granted under the Plan for favorable federal income tax treatment 
(including deferral of taxation upon exercise) as may be afforded 
incentive stock options under Section 422 of the Code, to the 
extent necessary to ensure the qualification of the Plan under 
Rule 16b- 3, and to the extent necessary to qualify the shares 
issuable upon exercise of any outstanding Options granted, or 
Options to be granted, under the Plan for listing on any national 
securities exchange or quotation in any national automated 
quotation system of securities dealers. Any amendment approved 
by the Administrator which is of a scope that requires 
stockholder approval in order to ensure favorable federal income 
tax treatment for any incentive stock options or requires 
stockholder approval in order to ensure the compliance of the 
Plan with Rule 16b- 3 shall be subject to obtaining such 
stockholder approval. Any modification or amendment of the Plan 
shall not, without the consent of a Participant, affect his or . 
her rights under an Option previously granted to him or her. 
With the consent oE the Participant affected, the Administrator 
may amend outstanding Option Agreements in a manner not 
inconsistent ; with, :.the-,, Plan. 



24. EMPLOYMENT' OR' OTHER' RELATIONSHIP . 

Nothing in this Plan or any Option Agreement shall be deemed 
to prevent the Company or an Affiliate from terminating the 
employment, consultancy or director status of a Participant, nor 
to prevent. a Participant from terminating his or her own 
employment, consultancy or director status or to give any 
Participant a right to be retained in employment or other service 
by the Company or any Affiliate for any period of time. 



25 . GOVERNING LAW . 

This Plan shall be construed and enforced in accordance with 
the law of the State of Delaware. 



91388.1 



17 



AMENDMENT NUMBER ONE TO 

AMERICA ONLINE, INC. 
1992 EMPLOYEE, DIRECTOR AND 
CONSULTANT STOCK OPTION PLAN 

This Amendment Number One to the America Online, 'n^' J Employee, 
Director and Consultant Stocl< Option Plan is made as of March 23, 1993. 

1 The first paragraph of Section 3 of the Plan, "Shares subject to the 

Plan," is hereby deleted in its entirety and the following is substituted 
therefor: 

The number of Shares subject to this Plan as to which 
Options may be granted from time to time shall be 1,010,000, 
or the equivalent of such number of Shares after the 
Administrator, in its sole discretion, has interpreted the effect of 
any stock split, stock dividend, combination, recapitalization or 
similar transaction effected after such date in accordance with 
Paragraph 1 6 of the Plan. 

2. In all other respects the Plan shall remain in full force and effect.